Credit Suisse Reports SF6 Billion Quarterly Loss on Trading

Credit Suisse Reports SF6 Billion Quarterly Loss on Trading


Feb. 11 (Bloomberg) -- Credit Suisse Group AG, Switzerland’s second-biggest bank, reported a 6.02 billion Swiss-franc ($5.2 billion) fourth-quarter loss on wrong-way trading bets and costs tied to cutting jobs and selling part of its fund unit.

The net loss compares with a 540 million-franc profit in the final three months of 2007, the Zurich-based bank said in a statement today. Analysts surveyed by Bloomberg had estimated a deficit of 4.2 billion francs for the quarter.

Chief Executive Officer Brady Dougan said in December the bank will cut 5,300 jobs and exit some proprietary trading to weather “challenging” markets after 3 billion francs in losses over the previous two months. Unlike UBS AG, the biggest Swiss bank, Credit Suisse declined government aid to split off toxic assets and has been attracting more money from wealthy clients.

“This will be a better year for Credit Suisse,” said Ralph Silva, director of research at Tower Group Plc. “They’re going to start taking more of the high net-worth individuals,” particularly in the European market.

Credit Suisse has fallen 46 percent over the past 12 months in Swiss trading, compared with a 61 percent drop at Zurich-based UBS and a 63 percent slump in the Bloomberg Europe Banks and Financial Services Index.

UBS, Deutsche

UBS yesterday reported a record 19.7 billion-franc loss for 2008 and said it will cut 2,000 more jobs at the investment bank to return the unit to profitability. Deutsche Bank AG, Germany’s biggest bank, last week reported a record 4.8 billion-euro ($6.3 billion) loss for the fourth quarter and its first annual deficit in more than 50 years.

Financial institutions worldwide have amassed $1.09 trillion of losses and shed about 274,000 jobs since the U.S. subprime mortgage market collapsed. Governments in countries including the U.S., Britain, France and Germany have also propped up banks to prevent a wider financial calamity.

Credit Suisse, which sidestepped the worst of the U.S. subprime crisis, faced rising losses after the September collapse of Lehman Brothers Holdings Inc. as market turmoil spread to other asset classes and the bank was forced to unwind unprofitable trading positions. The company had 1.7 billion francs of trading losses in the third quarter.

“We wonder if the reason is that business units are run quite autonomously, so the center’s bearish view on markets didn’t get fully expressed in the divisions’ risk taking and they were therefore simply too long and wrong,” Morgan Stanley analysts Huw van Steenis and Carlos Egea said in a note to clients last week.

Job Cuts

Credit Suisse plans to reduce the number of staff at the investment bank to 17,500 by the end of this year compared with 21,300 at the end of September, the bank said in December. UBS plans to cut the number of employees at its securities unit to 15,000 by the end of 2009.

Credit Suisse is cutting 2008 bonus payments at the investment bank by about 55 percent, two people familiar with the situation said last week. The bank had already said it would use illiquid securities such as leveraged loans and commercial mortgage-backed debt to pay part of the bonuses and introduce changes to allow it to claw back pay from recent years. Dougan, Chairman Walter Kielholz and Paul Calello, head of the investment bank, are forgoing bonuses for 2008.

Dougan, 49, who took over as CEO in May 2007 after heading the investment bank for three years, has said he foresees no circumstances under which state aid would be required. Credit Suisse raised 10 billion francs from investors in Qatar, Israel and Saudi Arabia in October to replenish capital.

Capital strength has helped Credit Suisse win client advisers and assets from the rich, according to Dougan. The bank hired 370 new client advisers by the end of November, more than the targeted 330 for 2008, added 40.2 billion francs in new assets from wealthy customers and plans to continue investing in its private banking expansion.

BLOOMBERG